No matter how much the gold market is loaded, an interesting situation emerges. Despite its recent price performance, the yellow metal remains an extremely resilient asset. Yes, the precious metal has a long way to go before any new bullish interest can hit the market. But let’s not underestimate how much support there is for the precious metal at these high prices.
Support point of gold prices
This week, we saw gold prices once again find support above $1,900 an ounce. They also want to finish the week above the initial resistance of $1,930 per ounce. All of this is happening as markets wait for the Federal Reserve to continue tightening its monetary policy. This environment has increased the yield of 10-year bonds up to 4%.
Due to the aggressive stance of the Fed, we see that the big banks have a more neutral view on gold for the second half of the year. Both Bank of America and BMO Capital Markets lowered their year-end average gold and silver prices. However, gold has been pulling out of higher bond yields as it had little impact on the US dollar, which closed Friday at a two-week low.
Rising expectations prevail
Many analysts are bullish on gold. Because if gold can withstand these headwinds, they predict what will happen when the Federal Reserve ends its tightening cycle and prepares to change its monetary policy. That was the key message of the mid-year outlook the World Gold Council released this week. Analysts say gold has less to lose on the downside in the current environment. They also point out that as the global economy sees the end of high interest rates and sees a potential downturn threaten, they have more to gain upstream.
According to WGC, this asymmetrical performance is why gold remains a valuable asset in every portfolio. Gold isn’t just seeing solid support. It may also start to attract some major attention as the potential for change in the global economy emerges. On Friday, state television RT reported that the Russian government confirmed that the BRICS countries Brazil, Russia, India, China and South Africa are planning to issue a new gold-backed trade currency. Accordingly, this situation will prompt central banks to buy gold quickly. It also means the final evolution of the move against the dollar.
gold backed currency
Russia has confirmed that the BRICS will create a gold-backed currency. The official announcement is expected to be made at the BRICS summit in South Africa in August. This will support gold’s long-term bullish rally. But many analysts remain skeptical about what this will look like.
Will the world see the return of a gold standard or will the precious metal be used only to create value and stability, similar to what central banks did last year? We will have to wait for the details to see if the new BRICS currency has the potential to rival the global dominance of the US dollar. But even speculation is providing some bullish momentum for gold.
Significant resistance level for yellow metal
According to Florian Grummes, Managing Director of Midas Touch Consulting, gold has been poised for an exit of $2,500 for the past 12 years. Now it needs to break the last resistance level to open its “extraordinary” upside. Grummes said, “Since 2011, gold has been in some kind of consolidation pattern. All it takes for gold is to break through this $2,070 level. Gold will easily rise to $600 in the next six to eight months from $1,920.” says.
Grummes said the key question for the market is when gold will exceed $2,070 an ounce. This will take a few months to a year. “But in the next two to three years, gold will go much higher,” Grummes said. says. From a technical standpoint, gold will quickly reach $2,500 an ounce. It will then advance to $3,500 and $5,000. Grummes said, “This formation has been going on for 12 years. The upside is outstanding.” says.
If there is a downward movement
On the downside, Grummes doesn’t think gold will drop much below $1,800 an ounce. He also adds that the most likely outcome of a downward move would be no more than $50. At the time of writing these lines, Comex gold futures for August delivery were trading at $1,914.70, down 0.64% daily.
Pressure from the Fed
cryptocoin.com On the face of it, the rally of gold stopped in the second quarter of the year, with the Federal Reserve taking a more hawkish stance against sticky inflation data. Gold came under pressure after Fed Chairman Jerome Powell promised at least two more rate hikes and pushed rate cuts off the table for this year.
Grummes disagreed with the Fed’s stance that further tightening would be needed. “At the end of the third or fourth quarter, the Fed will have to step back. Over the next few months you will see more and more problems arise in the real economy. And at some point, they’re going to have to cut rates again.” uses the phrase.
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